Some stability was injected into the markets this week, as the government shutdown came to an end, and the debt ceiling was suspended - at least temporarily. As earnings season for the third quarter kicked into high gear, investors were given a mixed bag, with blue chips like IBM, Goldman Sachs and JPMorgan Chase turning in results that disappointed investors, while Bank of America turned a profit and Google blew earnings expectations out of the water. With the government shutdown now over, the Labor Department announced that this coming Tuesday will see the release of the September Jobs Report, and on November 8, the October report will come out. Furthermore, September's Consumer Price Index will be released October 29. Treasury bond yields rose rose slightly on Tuesday, but retreated by the end of the week. Below, we look at all of Moody's municipal bond upgrades and downgrades that occurred over the past week.
Upgrades
- Brawley Union High School District, CA: Moody's upgraded this high school district to A1 from A2. The upgrade to A1 reflects the district's improved, albeit still weak wealth levels following decades of decline, as well as the upturn in the AV in fiscal 2014 following three years of decline. The A1 rating and upgrade also incorporate the district's multi-year track record of both, generating operating surpluses, and maintaining an above average amount of reserves during a period in which many other school districts saw their finances weaken.
- City of New York, NY: Moody's upgraded this city's short-term ratings to VMIG 1 from VMIG 2 for its General Obligation Bonds, Fiscal 2006, Series H, Subseries H-1 and H-2 (collectively, the Bonds) in conjunction with the substitution of the current letters of credit provided Dexia Credit Local with a new Standby Bond Purchase Agreement (SBPA or liquidity facility) to be provided by JPMorgan Chase Bank, N.A. (the Bank). The short-term VMIG 1 ratings are based on the short-term rating of the Bank, the general obligation rating of New York City, and Moody's assessment of the likelihood of an early termination of the SBPA without a mandatory tender.
- Hallsville Independent School District, TX: Moody's upgraded this independent school district's rating from A3 to A1. The A1 incorporates the stabilization of assessed values after a significant reduction as a result from reevaluation/reclassification pertaining to recent taxpayer litigation. The rating upgrade and assignment also reflects the district's improved financial reserve position after a period of financial stress related to the taxpayer litigation.
- St. Louis Park ISD No. 283, MN: Moody's upgraded this school district's underlying rating on outstanding general obligation debt from Aa3 to Aa2. The Aa2 underlying rating reflects the district's large tax base with above average income levels favorably located in the Twin Cities metropolitan area; multi-year operating surpluses which have increased fund balance levels and stabilized the district's financial position; positive enrollment trends; existence of voter approved excess operating levies; and average debt and pension burdens.
Downgrades
- Channelview Independent School District, TX: Moody's downgraded this school district to Aa3 from Aa2. The downgrade to Aa3 reflects the concentration in the district's tax base, that has been outpaced by similarly rated credits, as well as the district's high debt burden with a slow payout of principal outstanding. The rating also reflects stable financial performance, healthy reserves, and a below average socioeconomic profile.
- Athens County Port Authority, OH: Moody's downgraded this port authority to A2 from Aa3 in conjunction with the substitution of the current letter of credit provided by Wells Fargo Bank, N.A. with a letter of credit to be provided by Barclays Bank PLC. The new rating is based upon: (i) the direct-pay letter of credit provided by the Bank; (ii) the structure and legal protections of the transaction which provide for timely payment of debt service and purchase price to bondholders; and, (iii) Moody's evaluation of the credit quality of the Bank issuing the letter of credit.
- Stockton, CA: Moody's downgraded this city's series 2007 pension obligation bonds to Ca from Caa3. The Ca rating assumes losses will be between 50% and 65%, although these losses will accrue to Assured Guaranty Municipal Corp ("Assured", A2 stable) rather than to bondholders.
- Maryland Economic Development Corporation: Moody's downgraded this corporation from from A2 to A3. The downgrade to A3 from A2 reflects the change in the operating risk profile given the replacement of the General Electric Company (GE, rated Aa3/stable) Long Term Services Agreement (LTSA) with a GE parts, maintenance, and services agreement, exposing the Operator and off taker to higher costs should a large catastrophic event occur. The downgrade also incorporates the operating issues that have occurred in the last couple of years as the asset ages. The mechanical failure in Spring 2013 resulted in a 60 day forced outage.
- North Chicago Community Unit School District 187, IL: Moody's downgraded this school district to Baa2 from A3. The Baa2 rating on the district's GOULT debt reflects the district's severely pressured financial position, characterized by annual operating deficits and uncertain future revenue streams. Also incorporated in the rating is the district's modestly-sized, concentrated tax base in Lake County (GO rated Aaa), 40 miles north of Chicago (GO rated A3/negative outlook); weak demographic profile, including well below average resident socioeconomic characteristics and declining population trends; and elevated debt burden with slow amortization of principal.
- New Haven, CT: Moody's downgraded this city's outstanding general obligation bonds to A3 from A2. The downgrade reflects the continued deterioration of the city's financial position resulting from a deficit in fiscal 2012 and a larger-than-anticipated deficit in fiscal 2013. The A3 rating also incorporates the city's sizeable tax base which is anchored by higher education and healthcare, and a highly leveraged debt burden. Further, the rating factors the city's sizeable liabilities for pension and OPEB benefits.
- Rapides Finance Authority, LA: Moody's downgraded this finance authority's Single Family Mortgage Revenue Bonds, Series 2005A to Aa3(sf) from Aa1(sf). This rating downgrade to Aa3(sf) reflects Moody's review of account statements, the financial position of the program has underperformed original cash flow projections. As a result, the bond program is highly susceptible to projected insufficiencies in the event of administrative error.